Employers use paystubs to communicate with employees about their earnings, deductions, and other withholdings. Employees use them to track their income, budget, plan expenses, and prepare for tax time. They can also use paystubs when applying for loans and other types of credit.
Paystubs play a crucial role in the payroll process. They help ensure that employers pay employees accurately and on time. They also provide a record of earnings and deductions that professionals can use for tax purposes.
Employers provide paystubs to employees at the end of each pay period. Many employers send electronic paystubs, but employees can still request paper copies.
Parts of a paystub
A paystub typically contains the following information:
Employer name and contact information
Employees can use these details to identify their employers and contact them for possible questions.
Employee name and contact information
An employer uses an employee’s information to ensure that a paystub goes to the right person. If there are any discrepancies, it is easier to contact the appropriate individual using this section.
Date of payment
The date when the employer paid the employee should show in this section. An employee will receive his paystub the same day his employer paid him.
Pay period dates
The dates the paystub covers should show in this section. For example, a biweekly pay stub would cover two weeks of work.
Hourly rate or salary
This section should show the rate the employee earns per hour or year.
Gross pay
Employers often call gross pay “pretax income.” Gross pay is the total amount of income of an employee before deductions, such as taxes and insurance. To understand gross pay better, it includes hourly wages, overtime pay, commissions, bonuses, tips, and piece-rate pay. It does not include deductions, employee contributions, and employer contributions.
Net pay
Net pay or “take-home pay” is the amount of money an employee takes home after taxes and deductions.
Deductions
Deductions are the amounts of money for taxes, retirement savings, healthcare, and other purposes employers take from an employee’s gross pay.
Taxes
An employee pays taxes to the federal, state, and local government. The amount of taxes an employee owes depends on the tax bracket.
Employee contributions
An employee may have his employer withhold money from his paychecks to contribute to programs like 401(k) retirement savings plan or a Health Savings Account (HSA). Employers deduct these contributions before taxes.
Employer contributions
There are also instances when an employer may also make contributions to an employee’s savings plan or HSA. Contributions by the employer will show in this section. These contributions are often after taxes.
Legal requirements for having a paystub
While no federal laws mandate employers to provide paystubs to their employees, some states have their requirements. For example, California requires employers to give employees itemized pay stubs.
Employees should keep track of their paystubs as they can be helpful records for tax purposes and when applying for loans and credit, among other situations. Moreover, employers must keep accurate records of employee earnings and deductions. They typically maintain these records for at least three years.
Employers who fail to provide accurate pay stubs may face penalties.
In addition, the Fair Labor Standards Act (FLSA) dictates that employees must receive a detailed breakdown of their earnings if they are hourly employees. This law does not require employers to provide employees with paystubs. However, it requires information about hours worked and income on the paycheck.
Advantages of using a paystub
Professionals know that in the corporate world, it is essential to have a pay stub. Here are the advantages of using a paystub:
A pay stub is an itemized record of an employee’s earnings and deductions.
A pay stub can show how much an employee earned during a specific period and his deductions due to taxes, insurance, and other contributions.
A pay stub helps employees track earnings and deductions.
Employees can use a paystub for budgeting purposes and to ensure their employers are withholding the correct amount of taxes and deductions from each paycheck.
A pay stub helps employees track the hours they worked.
A paystub can assure employees that their employers are paying them correctly for all the hours they rendered work. As employers can track the hours they worked using a paystub, an employer can track employee productivity in terms of the number of hours worked.
A pay stub can help prevent disputes between employees and employers.
If there are questions about how much income an employee should get and the deductions from his paycheck, a paystub can serve as proof. Moreover, it is easier and faster to refer to a paystub than to go through an employee’s entire payroll history.
A pay stub can be an electronic document.
Using an electronic paystub reduces the chances of losing important information. It is also more convenient to access an electronic document than a paper one.
Paperless paystubs
Today, many businesses are going paperless. Paystubs are no exception to the digitization of business documents; more and more employers are sending paystubs electronically to their employees.
Fill out an electronic paystub here.
- Convenient — Employees can access their paystubs anytime and anywhere. When you use a payroll system, they might not have to wait for payday to get their paystubs.
- Secure — With paperless paystubs, there is no risk of losing or misplacing the document.
- Eco-friendly — Paperless paystubs reduce paper waste.
- Time-saving — Employers do not have to worry about spending time printing and distributing pay stubs.
- Cost-effective — Since there is no need to print and distribute electronic paystubs, they are a cost-effective alternative to paper paystubs.
Before you subscribe to an expensive payroll system, if you only need to fill out and send electronic paystubs, you can use PDFRun’s online editor.
Consider these factors before you choose a payroll system to generate electronic pay stubs:
- The security of the system — Choose a system that uses encryption to protect your employees’ personal information.
- The accessibility of the system — Your employees should be able to access their paystubs at any time, no matter their location. Also, choose a system that is accessible on any device.
- Ease of use — Your employers should not have a hard time using the system; the user interface should be simple.
- Flexibility — As your business may have unique needs, pick a system that you can customize to fit your business requirements.
A pay stub is a beneficial document for employers and employees alike. If you are looking for a paperless solution, you should consider using PDFRun to fill out and send electronic pay stubs. You can also use PDFRun to fill out, edit, and send other electronic documents.
